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($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
Why do people rob banks? Duh…that’s where the money is. Where’s the best place to have a bank? Duh..you put a bank where the money is. If you were a preferred bank, wouldn’t you want to have locations in Downtown Los Angeles, Southern California, the San Francisco Bay Area, New York and Houston, Texas. Of course you would. That’s where the people with money are.
Today I bought stock in Preferred Bank (NASDAQ: PFBC) at 79.01. I will sell it in 4 to 6 weeks at 91.26. Here’s why I like PFBC:
First of all, look at this amazing stock chart. PFBC stock is up 77% this year yet its PE is only 7.4 and it pays a 3.6% dividend. What’s not to like??
Preferred Bank is one of the larger independent commercial banks headquartered in California with over $6 billion in total assets. The Bank consistently places high in industry reviews for its outstanding financial performance and exceptional relationship banking services. In 2023, Preferred Bank was ranked #10 in the top 25 U.S. banks and ranked #5 by asset group in the RankingBanking: THE BEST U.S. BANKS published by Bank Director magazine. The annual study ranks 300 of the largest publicly traded banks based on year-end performance for 2022, using return on average equity, return on average assets, capital adequacy, asset quality and one-year total shareholder return. Preferred Bank was ranked as the best-performing community bank in the U.S. Their 2023 net income was $150.0 million or $10.52 per diluted share, both new records for the Bank. Compared to 2022, net income increased 16.5% and diluted earnings per share increased 20.9%. Preferred Bank remains one of the most profitable banks in all of the U.S. for the last several years.
The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Last week, Preferred Bank reported results for the quarter ended March 31, 2024. Preferred Bank reported net income of $33.5 million or $2.44 per diluted share for the first quarter of 2024.
Highlights for the Quarter:
Return on beginning equity of 19.36%
Net interest margin was 4.19%
Total deposits increased by $92 million or 1.62% for the quarter
Total loans increased $52 million or 1.0% for the quarter
Preferred Bank currently holds a market capitalization of $1.06 billion, with a low P/E ratio of 7.43, which is attractive when paired with its near-term earnings growth. The bank's revenue growth for the last twelve months as of Q1 2024 stands at 7.6%, pointing to a healthy top-line expansion.
Preferred Bank Revenues and Earnings Beat ANAL-yst Expectations. Revenue exceeded ANAL-yst estimates by 3.1%. Earnings per share (EPS) also surpassed ANAL-yst estimates by 2.4%. Taking into account the latest results, Preferred Bank's five ANAL-ysts currently expect revenues in 2024 to be US$283.5m, which is an increase over their previous revenue estimate of US$274.6m. They have inched up their price target by 6.4% to US$87.75per share, which is pretty darn close to my sell target. If you take its PE ratio and compare it to the average banking industry PE ratio of 11.90 you can see that even with a modest multiple expansion to 10, they stock price will get into the mid to high 90’s.
Investors have been acutely attuned to commercial real estate (CRE) risks recently due to higher interest rates and changes in how Americans work. On the surface, these risks may seem particularly concerning for small and regional banks, which tend to hold large concentrations of loans backed by commercial properties. However, CRE risks can vary substantially across property types and geographic locations, suggesting that aggregate CRE exposure may be a poor measure of risk. Regional banks such as PFBC don’t loan out to the big city skyscraper commercial real estate that never sees any employees anymore. It’s more likely that they are working with the 3 story office buildings in the big suburbs that house medical offices and doctors where people have to go to work every day. So as earnings come out, it becomes more and more evident that the headwinds facing these banks have to be attached to only the banks that really are being slammed and not to throw out the babies with the bathwater. A year ago, regional banks were trading in turmoil after multiple failures in the industry. Now, there has been buying in the sector as investors look forward to the Federal Reserve lowering interest rates. They will eventually, once inflation finally mitigates. Remember, these banks’ businesses are very loan centric, meaning the higher rate environment tends to slow their growth.
Sticking with Preferred, Here’s what the CEO, Li Yu, had to say:
“Our bank has generated a significant amount of free cash flow for the year 2023. We have used $50 million of the cash flow to buy back roughly 800,000 shares of our own capital stock and the rest were used to enhance our capital position. And we have also announced the increase, the dividends by 27% beginning 2024. In January, we also announced a new buyback program of another $50 million of capital stock. So, we are very mindful of looking for opportunity to return capital to our shareholders. And going forward, in the year 2024, we'll be carefully balancing ourselves between growth, capital enhancement and shareholder return.”
I’m still bullish on banks and as long as I’m into banks, I’ll go with the Preferred one!
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Why do people rob banks? Duh…that’s where the money is. Where’s the best place to have a bank? Duh..you put a bank where the money is. If you were a preferred bank, wouldn’t you want to have locations in Downtown Los Angeles, Southern California, the San Francisco Bay Area, New York and Houston, Texas. Of course you would. That’s where the people with money are.
Today I bought stock in Preferred Bank (NASDAQ: PFBC) at 79.01. I will sell it in 4 to 6 weeks at 91.26. Here’s why I like PFBC:
First of all, look at this amazing stock chart. PFBC stock is up 77% this year yet its PE is only 7.4 and it pays a 3.6% dividend. What’s not to like??
Preferred Bank is one of the larger independent commercial banks headquartered in California with over $6 billion in total assets. The Bank consistently places high in industry reviews for its outstanding financial performance and exceptional relationship banking services. In 2023, Preferred Bank was ranked #10 in the top 25 U.S. banks and ranked #5 by asset group in the RankingBanking: THE BEST U.S. BANKS published by Bank Director magazine. The annual study ranks 300 of the largest publicly traded banks based on year-end performance for 2022, using return on average equity, return on average assets, capital adequacy, asset quality and one-year total shareholder return. Preferred Bank was ranked as the best-performing community bank in the U.S. Their 2023 net income was $150.0 million or $10.52 per diluted share, both new records for the Bank. Compared to 2022, net income increased 16.5% and diluted earnings per share increased 20.9%. Preferred Bank remains one of the most profitable banks in all of the U.S. for the last several years.
The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Last week, Preferred Bank reported results for the quarter ended March 31, 2024. Preferred Bank reported net income of $33.5 million or $2.44 per diluted share for the first quarter of 2024.
Highlights for the Quarter:
Return on beginning equity of 19.36%
Net interest margin was 4.19%
Total deposits increased by $92 million or 1.62% for the quarter
Total loans increased $52 million or 1.0% for the quarter
Preferred Bank currently holds a market capitalization of $1.06 billion, with a low P/E ratio of 7.43, which is attractive when paired with its near-term earnings growth. The bank's revenue growth for the last twelve months as of Q1 2024 stands at 7.6%, pointing to a healthy top-line expansion.
Preferred Bank Revenues and Earnings Beat ANAL-yst Expectations. Revenue exceeded ANAL-yst estimates by 3.1%. Earnings per share (EPS) also surpassed ANAL-yst estimates by 2.4%. Taking into account the latest results, Preferred Bank's five ANAL-ysts currently expect revenues in 2024 to be US$283.5m, which is an increase over their previous revenue estimate of US$274.6m. They have inched up their price target by 6.4% to US$87.75per share, which is pretty darn close to my sell target. If you take its PE ratio and compare it to the average banking industry PE ratio of 11.90 you can see that even with a modest multiple expansion to 10, they stock price will get into the mid to high 90’s.
Investors have been acutely attuned to commercial real estate (CRE) risks recently due to higher interest rates and changes in how Americans work. On the surface, these risks may seem particularly concerning for small and regional banks, which tend to hold large concentrations of loans backed by commercial properties. However, CRE risks can vary substantially across property types and geographic locations, suggesting that aggregate CRE exposure may be a poor measure of risk. Regional banks such as PFBC don’t loan out to the big city skyscraper commercial real estate that never sees any employees anymore. It’s more likely that they are working with the 3 story office buildings in the big suburbs that house medical offices and doctors where people have to go to work every day. So as earnings come out, it becomes more and more evident that the headwinds facing these banks have to be attached to only the banks that really are being slammed and not to throw out the babies with the bathwater. A year ago, regional banks were trading in turmoil after multiple failures in the industry. Now, there has been buying in the sector as investors look forward to the Federal Reserve lowering interest rates. They will eventually, once inflation finally mitigates. Remember, these banks’ businesses are very loan centric, meaning the higher rate environment tends to slow their growth.
Sticking with Preferred, Here’s what the CEO, Li Yu, had to say:
“Our bank has generated a significant amount of free cash flow for the year 2023. We have used $50 million of the cash flow to buy back roughly 800,000 shares of our own capital stock and the rest were used to enhance our capital position. And we have also announced the increase, the dividends by 27% beginning 2024. In January, we also announced a new buyback program of another $50 million of capital stock. So, we are very mindful of looking for opportunity to return capital to our shareholders. And going forward, in the year 2024, we'll be carefully balancing ourselves between growth, capital enhancement and shareholder return.”
I’m still bullish on banks and as long as I’m into banks, I’ll go with the Preferred one!
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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